The document discusses different sources of short-term financing. It describes commercial paper as a short-term debt security issued by corporations to raise capital for short-term needs. It matures in under 270 days and provides modest returns to investors. International loans refer to loans between countries, often used to fund infrastructure and social programs. They can vary in terms, rates and purpose. The document also outlines international transactions like trade, foreign investment and currency exchange, and how businesses can finance international trade through various methods like letters of credit. It concludes with transactions between subsidiaries being internal financial exchanges that require robust controls and compliance.

1. UNSECURED SOURCES
OF SHORT-TERM
LOANS

2. 1. COMMERCIAL PAPER
1.1 Interest on Commercial Paper
2. INTERNATIONAL LOANS
2.1 International Transactions
2.2 Financing International Trade
2.3 Transactions between subsidiaries

3. 1. COMMERCIAL PAPER
Commercial paper refers to a short-term debt security issued by corporations and other large
institutions to raise capital for meeting short-term obligations. It is typically unsecured and
has a maturity of less than 270 days. Companies use commercial paper as a cost-effective
means of financing their immediate needs, such as payroll and accounts payable.
Key points about commercial paper include:
1. Issuer
2. Maturity
3. Denominations
4. Interest Rates
5. Market
6. Risk
Commercial paper plays a crucial role in the short-term
financing strategies of corporations and provides investors with
a way to earn a modest return on their cash reserves. However,
it's essential for investors to assess the creditworthiness of the
issuing entity before investing in commercial paper.

4. 1. COMMERCIAL PAPER
Types of Commercial Paper:
1. Promissory Notes
Promissory notes, or, simply, notes, are debt instruments written by one party
to another that promise to pay a specific amount of money by a certain date.
Notes are a common way for companies to issue commercial paper.

5. 1. COMMERCIAL PAPER
Types of Commercial Paper:
2. Drafts
A draft is a written agreement between three parties: a bank (the drawer), a
payer (the drawee), and a payee. The bank instructs the commercial paper issuer
to pay the lender (payee) a specific amount of money at a specific time.

6. 1.1 Interest on Commercial Paper
Let's say a retail firm is looking for short-term funding to finance some new
inventory for an upcoming holiday season.
 The firm needs PHP10 million. It offers investors commercial paper with a face
value of PHP10.1 million. This is in line with prevailing interest rates.
 When the commercial paper matures, investors in effect receive an interest
payment of PHP100,000 along with the PHP10 million they loaned out.
 This equates to an interest rate of 1%. This interest rate can be adjusted for
time, contingent on the number of days the commercial paper is outstanding.
 Say the term of the commercial paper is 30 days. This means the firm will raise
PHP10 million today and in 30 days, it may repay PHP10.1 million to investors
holding the commercial paper.

7. 2. INTERNATIONAL LOANS
International loans refer to financial transactions where one
country borrows money from another country or
international organizations.
These loans are typically used by governments to fund
various projects, such as infrastructure development, social
programs, or to address economic challenges. The terms and
conditions of international loans can vary, including interest
rates, repayment periods, and the purpose of the loan.
Countries often seek international loans when they face
budget deficits, need to stabilize their economies, or
undertake large-scale projects that require significant capital.

8. 2.1 International Transactions
International transactions refer to the exchange of goods, services,
or financial assets between individuals, businesses, or governments
from different countries.
These transactions can take various forms, including:
1. Trade in Goods and Services
2. Foreign Direct Investment (FDI)
3. Portfolio Investment
4. Technology and Intellectual Property Transfer
5. Foreign Exchange Transactions
Governments and international organizations often monitor and
regulate these transactions to ensure fair practices, economic
stability, and compliance with relevant laws and regulations.
International transactions play a crucial role in the global economy,
promoting economic growth, specialization, and the efficient
allocation of resources.

9. 2.2 Financing International Trade
Financing international trade involves various methods and financial
instruments to facilitate transactions between businesses in different
countries. Here are some key aspects of financing international trade:
1. Letter of Credit (LC)
2. Export Credit Insurance
3. Export Financing Programs
4. Open Account Financing
5. Trade Finance Banks
6. Factoring
7. Multilateral Development Banks
Understanding the various financing options and selecting the most
suitable method depends on factors such as the nature of the
transaction, the relationship between the parties involved, and the level
of risk tolerance. It's advisable for businesses engaged in international
trade to work closely with financial experts and institutions
experienced in trade finance.

10. 2.3. Transactions between Subsidiaries
Transactions between subsidiaries refer to financial dealings or exchanges
of goods and services between two or more companies that are under the
common ownership of a parent company. These transactions are internal to
the larger corporate group and involve the movement of funds, assets, or
services between the subsidiaries. Key points regarding transactions
between subsidiaries:
1. Intercompany Transactions
2. Transfer Pricing
3. Financial Consolidation
4. Regulatory Compliance
5. Tax Implications
6. Documentation
7. Risk Management
8. Technology Solutions
It's important for companies to have robust internal controls and processes
in place to manage transactions between subsidiaries effectively, ensuring
accurate financial reporting and compliance with legal and regulatory
requirements.

11. THANK YOU!
Aldrin Jon R. Madamba